Months on Lot Value Erosion

How Months on Lot Value Erosion works

A car sitting unsold on a dealer lot typically loses perceived value each month. Buyers recognise that older inventory may signal lower demand, potential condition issues, or a dealer's increased motivation to clear space. This tool calculates the compounded effect of that erosion: it takes the original asking price and reduces it by a fixed percentage each month the vehicle remains unsold, using the same compound logic as depreciation.

The formula

The calculator uses compound monthly erosion:

Eroded value = Asking price × (1 − Monthly erosion % ÷ 100)^{Months on lot}

For example, a £18,000 car listed for 4 months at 1.5% monthly erosion becomes £18,000 × (1 − 0.015)⁴ = £16,944. The tool also reports total value eroded (£18,000 − £16,944 = £1,056) and the overall erosion percentage (5.9%).

Where this method is most accurate

Compound erosion models work best for franchised dealers with public inventory systems where list dates are visible and market forces are relatively transparent. The assumption of constant monthly erosion holds most reliably over 1–6 months; beyond that, dealer strategy shifts (auction, trade-in, reconditioning) often dominate. The calculation does not account for mid-listing price reductions, condition changes, or seasonal demand swings.

What this tool does not do

The calculator does not retrieve actual listing dates from any database, verify the asking price against book values, or incorporate vehicle history, mileage, or mechanical condition. It does not suggest a specific offer amount or predict whether a dealer will accept a given bid. The erosion percentage is user-supplied; real erosion rates vary widely by make, model, body style, and local market velocity.

Disclaimer

This tool is for educational and estimation purposes only. It does not constitute financial advice, vehicle valuation, or a guarantee of negotiation outcomes. Actual dealer pricing depends on inventory costs, holding expenses, reconditioning, and buyer competition. Always inspect the vehicle history, conduct a pre-purchase inspection, and verify all transaction terms independently before committing to a purchase.